• BREAKING NEWS ABC shows live and on-demand -- Download the WATCH ABC app!

California online sales tax now in effect

September 15, 2012 12:00:00 AM PDT
The days of tax-free online shopping officially ended Saturday as a state tax for Internet purchases went into effect.

Internet shopping had always been tax free in California, but last year the state legislature passed a bill forcing approximately 200 e-retailers, including Amazon and Overstock, to tax customers. Sales tax rates in California reach 9.75 percent and are among the highest in the country.

State Officials estimate the tax will generate $200 million a year, which is sure to fill budget holes. Annually, the Golden State loses about $1 billion in state tax revenue because most Californians don't know they're suppose to pay the equivalent of a sales tax on their state income tax, filling under a use tax.

Only a few states like New York and Texas collect an online sales tax right now. Even with the extra charge, some Southern Californians say online shopping is still saving them money.

"Even if they tax it, I think we'll still shop online because at least I'm not commuting, not wasting time going there, and gas," said Manta Nath of Manhattan Beach.

Legislators say the new tax is a win for the entire state, especially small businesses owners, because it should encourage local spending and create new jobs.

The Associated Press contributed to this report.


Load Comments